CTS Eventim AG & Co. KGaA (ETR:EVD) Investors Are Less Pessimistic Than Expected

When close to half the companies in Germany have price-to-earnings ratios (or "P/E's") below 17x, you may consider CTS Eventim AG & Co. KGaA (ETR:EVD) as a stock to potentially avoid with its 25.2x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

With its earnings growth in positive territory compared to the declining earnings of most other companies, CTS Eventim KGaA has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for CTS Eventim KGaA

Want the full picture on analyst estimates for the company? Then our free report on CTS Eventim KGaA will help you uncover what's on the horizon.

How Is CTS Eventim KGaA's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like CTS Eventim KGaA's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 28% last year. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 4.5% each year as estimated by the eleven analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 14% each year, which is noticeably more attractive.

In light of this, it's alarming that CTS Eventim KGaA's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

The Bottom Line On CTS Eventim KGaA's P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that CTS Eventim KGaA currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for CTS Eventim KGaA that you should be aware of.

Of course, you might also be able to find a better stock than CTS Eventim KGaA. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com